It’s a question that has been asked more and more in recent years. Back in 2012, autoenrollment was introduced making it compulsory for companies to offer a workplace pension for eligible employees.
However, many employers are still reluctant to invest in professional pension advice. Lemonade Reward is just one provider that helps individuals take control of their work life and understand their options.
They see a lot of businesses and employees miss out on crucial information and opportunities to better their finances for a lot of reasons. One of which is the expense. Employers (for the most part) are not willing to pay for one-to-one advice – but doesn’t that pose a contradicting message for staff who need positive and long-term financial support?
There are various schemes available and, with the help of a professional advisor, companies can choose one that best suits their business model and employees’ requirements.
So, why is professional pension advice so important?
Well, for starters, it can ensure that employees are getting the most out of their scheme. It can also help employers to understand their responsibilities when it comes to their contributions – something which is often overlooked.
Not paying on time or failing to enrol eligible employees could see businesses facing fines and impacting the relationship between themselves and their team members. As an employee benefit that offers the most long-term support and benefit, it is one that should be taken far more seriously.
Professional advice can also help to educate staff about their own personal finances and how they can make the most of them – coming out on top when things look bleak. This is especially important for the current climate and rising living costs as well as younger workers who may not have much experience in managing money.
For some, this may be the first time they are paying into a pension fund. It could even be the first time they are having to think about retirement. At twenty-something – it’s unlikely this will be a concern until you are forced to think about it.
For this reason, plenty of young people choose to opt out, believing that this money will be better invested into their lives right now.
Similarly, with the unprecedented rise in inflation and living costs, employees are more likely to reduce or stop contributions in order to pay household bills or create a more accessible savings fund for the nearer future. So, being given the correct support from the start is essential.
Comprehensive pension advice is one way companies can demonstrate the importance of financial strategy and long-term investment. It reassures them of sensible financial decisions and offers helpful resources in times of hardship.
Ultimately, this education can lead to a more content and productive workforce who understand their pension is being well managed – giving them peace of mind and building trust in their employer/stakeholder.
One size does not fit all…
What’s more, professional pension advice can be tailored to an organisation’s specific needs.
Lemonade Reward have offered guidance on how to communicate the pension scheme to staff as well as how best to engage employees with their new financial responsibilities (amongst plenty of other advice).
With so many schemes available, it can be hard for employers to know which one is going to work best for them while offering the most benefits and opportunities for their employees.
Alternatively, it can be difficult to think beyond the basics of a pension scheme and truthfully communicate the reasons why you are offering this particular benefit to employees.
It’s an ongoing form of communication with the entire company and is something individuals will carry with them their whole lives. The way they go about it now will impact their quality of life and potential for retirement down the line.
For companies who are still undecided about whether professional pension advice is worth the expense, it’s also worth considering the long-term effects of not offering this support to employees. After all, they are the future of any business.
Do Your Employees Understand Their Options?
Some people may be tempted to enrol and leave their pension contributions at that for the entirety of their careers. But are they aware that they can tailor the fund to suit them and get the best possible return for retirement?
For example, employees can increase pension contributions in order to receive a larger payout when they retire. This is something that pension advice services can help with and determine whether or not an individual is in a position to boost their savings.
What’s more, if an employee changes jobs, their pension doesn’t have to be left behind. They can transfer the money into a new pension scheme – but this isn’t always as straightforward as it sounds.
There are limits on how much an employee can transfer and, in some cases, they may incur charges for doing so. But if nobody knows about this, they could have pots laying around from previous employers or be sitting on extra income that’s not making any return.
The ability to build a strategy
Only with expert advice can staff really tailor their finances to suit their individual stage in life. It might not occur to businesses that their employees will have different needs depending on their role within the company as well as how these needs change throughout their careers.
Communicating clearly and regularly with employees as well as advisors and providers of the scheme itself can ensure everyone involved are hitting their financial goals.
It will allow those hard-to-reach employees to access the resources they need as well as ensure people at different levels of the company receive tailored advice suited to their changing financial journeys.
What about those higher earners?
High-income employees are often the most in need of pension advice but, at the same time, the most difficult to engage.
This is because they may have already set up their pension schemes or be confident they are making the right decisions without any help.
However, there are many benefits that these employees can take advantage of with pension advice – such as how to make the most of their annual allowance and using it in conjunction with other savings pots.
Many people are unaware of the limits associated with tax relief and personal pension contributions. It’s a massive part of the education process because it can save people from incurring huge tax fees or sanctions.
What’s more, high-earners are often inundated with financial products and services that claim to offer them the best possible return on investment. But sifting through these can be time-consuming and confusing without any professional guidance.
Having bespoke advice through an employer offers reassurance that they can get the best out of their pension fund and are able to make any strategic changes when they need to.
This also goes hand in hand with employee-employer communication as it opens the discussion around contributions and understanding the scheme better.
A final thought…
When it comes to pension advice, there is no one-size-fits-all solution. What works for one company might not be suitable for another and the same goes for employees.
As much as we may like to think so, we are not all experts on our own finances. This is why it’s so important for businesses to really think about what they want to achieve and how best to support their employees.
Pension schemes are a long-term investment and should be treated as such. This means taking a strategic approach that looks at the big picture as well as the smaller details.
Failing to do this could have dire consequences further down the line – not just for employees but also for employers who may find themselves footing a hefty bill or answering to the Ombudsman.
Are you looking for advice? Lemonade Reward offer a range of one-to-one services designed to help employees take control of their future and allow businesses to positively shape their employee benefits.